Dave Says

Rental Runaround (August 2016)

Do you think having cancer insurance is a good idea? (July 2015)

Setting up the kid's car insurance (February 2015)

Check cashing for the unbanked (September 2014)

Keep the lifestyle simple (May 2014)

Should she have skin in the game? (September 2013)

Time to pay it off! (September 2013)

Making It Through Medical Leave (July 2013)

Should We Ever Buy A House? (January 2013)

Be Tightfisted Until The Crisis Is Over (January 2013)

Paying the parents (December 2012)

Sallie Mae vs. selling the car (December 2012)

Whatís the worst that can happen? (December 2012)

Letting them in on the secret (December 2012)

Not ready to combine finances (November 2012)

What The Law Will Allow (August 2012)

Making The Right Choice (August 2012)

Baby comes first! (August 2012)

Get the brother-in-law out! (August 2012)

Trust Broken After Cosigning (April 2012)

Review The Research (April 2012)

The Investing Makes Her Nervous (April 2012)

Lifestyle Changes (April 2012)

Do I Tithe On An Inheritance (March 2012)

No Credit Score, No Mortgage? (March 2012)

Where Do Toys Fit In The Baby Steps? (March 2012)

Guilt and Cynicism (March 2012)

Where Does Debt Go When Filing Bankruptcy? (December 2011)

Where Does The Donation Go (December 2011)

Ready to Buy (December 2011)

Intensity Hurting The Marriage (December 2011)

Hobby Car? (November 2011)

Not Quite Dearly DepartedÖ (November 2011)

Enough For Retirement? (November 2011)

Itís Just Another Gimmick (November 2011)

Will Paying Early Help? (November 2011)

Bargain Master! (November 2011)

Sisters Should Have Asked! (August 2011)

Buy Now Or Wait? (August 2011)

So, He Knows How To Manage Money? (August 2011)

Girlfriendís Money Problems (August 2011)

Smaller Down Payment? (August 2011)

Why Canít She Get Another Job? (August 2011)

Landlord Wants Protection (June 2011)

Prepping Kids For Healthy Habits (June 2011)

Switching To Company Debit Cards (June 2011)

Should I Reduce My Tithe? (June 2011)

Closing The Account (February 2011)

Dishonesty Is Not The Best Policy (February 2011)

Piles of Cash? (February 2011)

New Car In A Bad Situation (February 2011)

Drop Coverage? (November 2010)

Can't Pay For Her Wedding (November 2010)

Does Pride Keep Us In Debt? (November 2010)

Not Time For A Reunion (November 2010)

You're Being Hoodwinked! (November 2010)

Buying Used or New? (November 2010)

Is There A Recommended Vacation Percentage? (July 2010)

Donít Do it for the Gas Mileage (July 2010)

Investing Strategy for Retirement (April 2010)

Insurance? (April 2010)

Triple Play Investing (February 2010)

How Do I Get Started in Real Estate (February 2010)

Published: December 2011
Where Does Debt Go When Filing Bankruptcy?  

Dear Dave,

What happens to the money that is owed when someone files bankruptcy? Do creditors just have to write it off, or do other people pay the price through taxes or higher interest rates?

Grace

Dear Grace,

In most cases the creditor just loses the money. Thatís one of the risks businesses face. Of course, any bankruptcy is also a seriously bad mark against the filerís credit record.

Chapter 13 filings may be considered a little less severe than Chapter 7 because youíre showing an interest in retiring the debts. They often allow Ė if you have a regular income and limited debt Ė to keep some of the property you might otherwise lose. Also, some debt balances may be partially discharged, with the filer agreeing to make monthly payments to the trustee for distribution among remaining creditors.

A Chapter 7 bankruptcy is lots tougher on the one who files. It involves liquidating all assets that arenít exempt. Some of the filerís property may be sold by a court-appointed official Ė a trustee Ė or just turned over to creditors.

Itís really a lose-lose situation, Grace. The business loses money, and the filer suffers the emotional pain of participating in a shameful process.

óDave

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